The 84 Month Car Loan

By Douglas A. McIntyre Updated Jan 29, 3:44PM EST · Published Jan 29, 11:20AM EST

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The 84 Month Car Loan — © Citysqwirl / iStock via Getty Images

According to Bloomberg, car loan defaults are higher than they were in 2009. The was the worst year of The Great Recession. One reason is that car companies and financial institutions offer loans that can stretch to 84 months. With high interest rates these can take 40 weeks of income to pay off for a middle class income buyer. That means nearly a year of income to pay a seven year car loan.

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The long duration car loan risk is not limited to a few people. According to Cox Automotive, 27% of buyers take loans payable over a period of 73 to 84 months. Interest rates on these loans can reach 6%, which accounts for much of the 40 week payback period

The 84 month loan has a good chance of colliding with a recession. Recessions come in one decade cycles on average . The odds of an overlap with an 84 month car loan is considerable. Default rates on car loans generally rise as GDP falls.

Does an 84 month car loan look good on paper? If monthly payment sizes are the only yardstick. Beyond that, car buyers with long duration loans are usually fools.

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These are the deadliest cars to drive in America.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.